LO.3 Determine whether the following transactions are taxable. If a transaction is not taxable, indicate what type of reorganization is effected, if any.
a. Alpha Corporation owns assets valued at $400,000 and liabilities of $100,000. Beta Corporation transfers $160,000 of its voting stock and $40,000 in cash for 75% of Alpha's assets and all of its liabilities. Alpha distributes its remaining assets and the Beta stock to its shareholders. Alpha then liquidates.
b. Alpha Corporation owns assets valued at $300,000 with liabilities of $100,000, and Beta Corporation holds assets valued at $1 million with liabilities of $200,000. Alpha exchanges 80% of its voting stock for 100% of Beta's assets and liabilities. Beta distributes the Alpha stock to its shareholders. Beta then liquidates.
c. Alpha Corporation obtained 200,000 shares of Beta Corporation's stock 10 years ago. In the current year, Alpha exchanges 40% of its stock for 500,000 of the remaining 600,000 shares of Beta stock. After the transaction, Alpha owns 700,000 of the 800,000 Beta shares outstanding.